MEMORANDUM AND ORDER
This matter is before the Court on the motion for remand to state court based on lack of subject matter jurisdiction (Doc. 19) and the motions for remand to state court based on procedural defects in removal (Docs. 9, 13) brought by Plaintiffs Robert Potter, Edna Grench, and Dorothy Luettinger. For the following reasons, the motion for remand to state court based on lack of subject matter jurisdiction is DENIED. The motions for remand to state court based on procedural defects in removal are GRANTED.
Introduction
These consolidated cases, which are successors to a case previously on the Court’s docket,
Potter v. Janus Investment Fund,
No. 03-cv-00692-DRH (S.D. Ill. filed Oct. 23, 2003), are among a number of putative class actions pending before the Court concerning so-called “market-timing,” an arbitrage practice that exploits differences between the value of foreign securities held by a mutual fund and the fund’s “net asset value” as calculated once a day at the close of the New York Stock Exchange for purposes of redemption of fund shares.
See generally DH2, Inc. v. U.S.S.E.C.,
Potter and Luettinger filed their claims originally in 2003 in the Circuit Court of the Third Judicial Circuit, Madison County, Illinois, whereupon those claims were removed to this Court pursuant to the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”), Pub.L. 105-353, 112 Stat. 3227 (codified at 15 U.S.C. § 77p(b)-(f) and 15 U.S.C. § 78bb(f)), which, as will be discussed in more detail presently, prohibits the maintenance of certain claims regarding securities as a class action under state law. The Court subsequently remanded the claims of Potter and Luettinger to state court for lack of subject matter jurisdiction,
see Potter v. Janus Inv. Fund,
No. 03-CV-0692-DRH,
Following the issuance of
Kircher II,
Potter, Grench, and Luettinger attempted to file an amended complaint in this Court. The Court struck the amended complaint and dismissed the case. Potter, Grench, and Luettinger then appealed from the dismissal. In January 2006 the Supreme Court of the United States agreed to hear an appeal from
Kircher I, see Kircher v. Putnam Funds Trust,
— U.S. -,
Discussion
A. Legal Standard
Under 28 U.S.C. § 1441, “any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the
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district and division embracing the place where such action is pending.” 28 U.S.C. § 1441(a).
See also Butter Trucking Co. v. Owner Operator Indep. Driver Risk Retention Group, Inc.,
B. Subject Matter Jurisdiction
As discussed, Plaintiffs have moved for remand on the grounds both that the requirements for the exercise of federal subject matter jurisdiction under SLUSA and the procedural requirements for removal under 28 U.S.C. § 1446(b) are not met in this case. Because “issues affecting a federal court’s subject matter jurisdiction are ‘fundamentally preliminary,’ ” the Court will address first the question of subject matter jurisdiction before turning to Plaintiffs’ arguments concerning procedural defects in removal.
In re General Motors Corp. Dex-Cool Prods. Liab. Litig.,
SLUSA was enacted, of course, against the backdrop of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Pub.L. No. 104-67, 109 Stat. 743 (1995) (codified at 15 U.S.C. §§ 77z-l, 77zr-2, 78u-4, 78u-5, 77t, 78o, 78t & 78u), which created procedural devices to enable district courts quickly to identify and dismiss meritless class actions alleging fraud in the purchase and sale of securities.
See
15 U.S.C. § 77z-1(b);
Id.
§ 78u-4(b).
See also Lander v. Hartford Life & Annuity Ins. Co.,
SLUSA amended the Securities Act of 1933 and the Securities Exchange Act of 1934 to preclude the maintenance of certain state-law claims regarding securities as class actions, and to provide for the removal to federal court of class actions asserting those claims. Specifically, SLU-SA amended the 1933 Act to provide, in pertinent part:
No covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party alleging -
(1) an untrue statement or omission of a material fact in connection with the purchase or sale of a covered security; or
(2) that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security.
'I* *1» ¥ s|: í¡í
Any covered class action brought in any State court involving a covered security ... shall be removable to the Federal district court for the district in which the action is pending!.]
15 U.S.C. § 77p(b), (c). The same provisions were added to the 1934 Act.
See
15 U.S.C. § 78bb(f)(l)-(2).
2
Thus, an action will be dismissed under SLUSA if it is (1) a “covered class action,” (2) that is based on a state law, (3) alleging a misrepresentation or omission of a material fact or use of any manipulative or deceptive device or contrivance (4) “in connection with” the purchase or sale of a covered security, and all of these elements must be present for preclusion to apply.
See Beckett v. Mellon Investor Servs., LLC,
No. C06-5245 FDB,
In the Court’s 2004 order remanding the claims of Potter and Luettinger for lack of subject matter jurisdiction, the Court sided with what was at that the time the weight of authority in holding that class-action claims on behalf of persons who have held, rather than purchased or sold, securities are not claims “in connection with” the purchase or sale of covered securities within the meaning of SLUSA.
See Potter,
What is chiefly in dispute in this instance is whether Plaintiffs’ claims assert a misrepresentation or omission of a material fact or use of a manipulative or deceptive device or contrivance within the meaning of SLUSA in connection with purchases or sales of covered securities. Plaintiffs argue that, because the allegations of their complaint are framed as claims for negligence and breach of fiduciary duty, rather than fraud, they are not within the scope of SLUSA. Of course, just as federal pleading rules do not require a plaintiff to specify any particular legal theory in a complaint,
see George v. Kraft Foods Global, Inc.,
No. 06-cv-798-DRH,
The gist of Plaintiffs’ argument against SLUSA preclusion of their claims is simply that, because they do not allege any intent to deceive on the part of Defendants, their claims are outside the scope of the statute. However, this argument assumes, incorrectly, that scienter or intent to deceive is a necessary predicate to any preclusion under the statute. Under the 1934 Act, of course, it is unlawful “[t]o use or employ, in connection with the purchase or sale of any security ... any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [Securities and Exchange] Commission [ (“SEC”) ] may prescribe^]” 15 U.S.C. § 78j(b). The United States Supreme Court has held that a requirement of scienter necessarily inheres in this statutory provision because “[t]he words ‘manipulative or deceptive’ used in conjunction with ‘device or contrivance’ strongly suggest that [Section] 10(b) [of the 1934 Act] was intended to proscribe knowing or intentional misconduct.”
Ernst & Ernst v. Hochfelder,
Also significant is the fact that SLUSA expressly exempts from its scope state-law class actions that are brought as derivative actions.
See
15 U.S.C. § 77p(f)(2)(B). The statutory exception indicates that SLUSA was designed to extend broadly to actions in which alleged mismanagement of a corporation by its officers has caused direct injury to the corporation that is only indirectly an injury to shareholders of the corporation.
See
12B William Meade Fletcher et ah,
Fletcher Cyclopedia of the Law of Private Corporations
§ 5924 (perm.ed., rev.vol.1999) (stating that “[a]
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shareholder ordinarily cannot, as an individual as distinguished from a representative of the corporation, sue directors or other corporate officers for mismanagement, negligence or the like,” because such claims “belong[ ] to the corporation.”) (collecting cases).
See also In re Goldman Sachs Mut. Funds,
No. 04 Civ. 2567(NRB),
The Court has no difficulty concluding that the claims in this case are within the scope of SLUSA. Under SLUSA, “[t]he element of a misrepresentation or omission of a material fact is satisfied when ... a plaintiff alleges a misrepresentation ... concerning the value of the securities ... sold or the consideration received in return.”
Araujo v. John Hancock Life Ins. Co.,
Could the SEC maintain an action under § 10(b) [of the 1934 Act] and [17 C.F.R. § 240.]10b-5 against mutual funds that fraudulently or manipulatively increased investors’ exposure to arbitrage? Suppose the funds stated in their prospectuses that they took actions to prevent arbitrageurs from exploiting the fact that each fund’s net asset value is calculated only once a day. That statement, if false (and known to be so), could support enforcement action, for the deceit would have occurred in connection with investors’ purchases of the funds’ securities. Similarly, if these funds had stated bluntly in their prospectuses (or otherwise disclosed to investors) that daily valuation left no-load funds exposed to short-swing trading strategies, that revelation would have squelched litigation of this kind.
These observations show that plaintiffs’ claims depend on statements made or omitted in connection with their ... purchases of the funds’ securities .... Our plaintiffs’ effort to define non-purchaser-non-seller classes is designed to evade PSLRA in order to litigate a securities class action in state court in the hope that a local judge or jury may produce an idiosyncratic award. It is the very *700 sort of maneuver that SLUSA is designed to prevent.
As discussed, the applicability of SLU-SA preclusion in this instance does not hinge on whether the omissions at issue were made with intent to deceive or not, provided the alleged omissions were made in connection with purchases or sales of covered securities. Because the substance rather than the form of Plaintiffs’ claims concerns material omissions in connection with purchases or sales of covered securities, those claims are within the scope of preclusion under SLUSA.
See Kingdom, 5-KR-41, Ltd. v. Star Cruises PLC,
No. 01 Civ. 2946(DLC), 01 Civ. 7670(DLC),
Moreover, the injury alleged by Plaintiffs, specifically, dilution of share value due to market-timing arbitrage, obviously is derivative in nature. As the
Kircher II
court recognized, these claims, being derivative, are within the scope of SLUSA unless brought derivatively on behalf of the funds after a demand by shareholders on corporate officers.
See
Finally, under the recent decision of the United States Supreme Court in
Dabit,
it is clear that the claims asserted in the matter at bar are within the scope of SLU-SA. In
Dabit
the Court emphasized that “[t]he magnitude of the federal interest in protecting the integrity and efficient operation of the market for nationally traded securities cannot be overstated,” and that “federal law, not state law, has long been the principal vehicle for asserting class-action securities fraud claims.”
The Dabit Court’s broad interpretation of SLUSA preclusion is supported by the language of the statute, which does not limit preclusion under SLUSA to situations where misrepresentations or omissions are made by a defendant sought to be held liable under state law. Rather, preclusion under the statute also applies when class-action claims under state law in connection with purchases or sales of covered securities coincide with alleged misrepresentations or omissions of fact by third parties. As discussed, the statute prohibits the maintenance under state law of class actions alleging “that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security.” 15 U.S.C. § 77p(b)(2) (emphasis added). Importantly, however, the other subsection of 15 U.S.C. § 77p(b) contains no such limitation, instead extending preclusion under the statute to a state-law claim alleging “a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security.” 15 U.S.C. § 77p(b)(l). Thus, as both Dabit and the language of SLUSA demonstrate, class-action claims under state law are within the scope of the statute where they coincide with misrepresentations or omissions in connection with purchases or sales of covered securities, whether made by a defendant or a third person, and regardless of whether federal securities laws furnish a remedy to a plaintiff.
In this instance it is clear that Plaintiffs’ state-law claims coincide with alleged securities fraud. Market timing in itself is not unlawful, but “it nevertheless is prohibited by Rule 10b-5 [of the SEC] if it is engaged in by favored market insiders at the expense of long-term mutual fund investors from whom it is concealed and who have a right to rely upon its prevention by fund advisers’ and managers’ good faith performance of their fiduciary obligations.”
In re Mutual Funds Inv. Litig.,
C. Procedural Defects in Removal
Although the Court has concluded that it has subject matter jurisdiction in this instance, this is not the end, of course, of the Court’s inquiry as to whether it may exercise jurisdiction over these consolidated cases on removal. Instead, Defendants must also establish compliance with the procedural requirements for removal. In general, a defendant seeking to remove a case from state court to federal court must file a notice of removal within thirty days after service of an initial pleading in the case.
See
28 U.S.C. § 1446(b). If, however, a case is not removable at the outset, a notice of removal may be filed within thirty days after the defendant receives “a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable.”
Id.
The procedural requirements governing removal are not jurisdictional, but they are “mandatory and strictly applied.”
Fields v. Jay Henges Enters., Inc.,
Civil No. 06-323-GPM,
The chief issue for the Court to decide is whether Defendants have pointed to an “order or other paper” authorizing successive removals of the claims before the Court. In this instance Defendants offer the Court a menu of purported orders and other papers supposedly permitting successive removals, including: the United States Supreme Court’s decision in
Dabit;
the Seventh Circuit Court of Appeals’ decision in
Kircher IV;
the Court’s order executing the mandate in
Kircher TV
and remanding the
Potter
case to state court; and an order of the Madison County circuit court administratively re-opening the file in the
Potter
case on November 9, 2006. The analysis that follows concerning whether the procedural requirements for removal are satisfied in this matter is informed by a recent decision by another judge of the Court,
Dudley v. Putnam Investment Funds,
As an initial matter, the Court concurs with
Dudley
that neither 28 U.S.C. § 1447(d) nor the doctrine of “the law of the case” precludes successive removals under the circumstances presented here. Although Section 1447(d) precludes review of an order remanding a case to state court by reason of jurisdictional or procedural defects in removal, it does not bar a defendant from seeking a successive removal of a case based on an intervening change in the legal or factual basis for removal.
See Dudley,
Thus, the Court turns to the question of whether Kircher IV, the Court’s order executing the mandate in Kircher IV by remanding the Potter case to state court, or the order of the state court administratively re-opening the file in the Potter case on November 9, 2006, permit successive removal of the claims before the Court. In Dudley, as here, the defendants in a putative class action against a mutual fund based on alleged devaluation of fund shares due to market-timing arbitrage argued that Kircher IV and a district-court order executing the mandate in Kircher IV were “orders” authorizing removal within the meaning of 28 U.S.C. § 1446(b). See Dudley, at 1107-08. 6 The plaintiffs in *705 Dudley argued that, while both documents were orders within the meaning of the statute, they nonetheless were not orders from which it could be “ascertained that the case is one which is or has become removable” within the meaning of Section 1446(b), because neither order affected the existence of federal subject matter jurisdiction as to the claims in the Dudley case. See id. at 1107-08. Instead, Kircher IV merely executed the mandate of the Supreme Court in Kircher III, while the district court’s order merely executed the mandate of the Seventh Circuit Court of Appeals in Kircher IV, thus effecting a remand of the claims in Dudley to state court. See id.
To determine whether the procedural requirements
for
removal were satisfied,
Dudley
examined the meaning of the term “order” as used in 28 U.S.C. § 1446(b). Employing traditional canons of statutory construction,
Dudley
concluded, with the aid of a legal dictionary, that the “ordinary and plain meaning” of the term “order” as used in Section 1446(b) is “[a] command, direction, or instruction” by a court.
Dudley,
at 1107.
See also Doe v. American Red Cross,
In Kircher IV the Seventh Circuit Court of Appeals noted that ... the Supreme Court’s decision in Dabit had rejected this Court’s original basis for remanding this case in 2004 .... However, the Kircher IV court made no determination about whether federal subject matter jurisdiction is proper in this case under SLUSA and in fact it expressly “reserved” that issue for a later time .... Most importantly, the Kircher IV court stated explicitly that the issue to be resolved on any future removal of the case under SLUSA would be whether Dabit — not Kircher IV or a remand order entered pursuant to the mandate in Kircher IV — “supplies an intervening change of law” so as to “justify a successive removal” ---- Thus, nothing in Kircher TV constitutes a command or direction concerning the existence of federal subject matter jurisdiction in this case.
Similarly, the Court’s order remanding this case to state court pursuant to the mandate in Kircher TV cannot be regarded as a command with respect to the existence of subject matter jurisdiction in the case. Rather, the Court merely executed a mandate of the Seventh Circuit Court of Appeals, as the Court was required to do and in fact had no jurisdiction to do otherwise ---- Thus, this Court’s order executing the mandate in Kircher IV made no determination about the existence of subject matter jurisdiction in this case and cannot be deemed an “order” authorizing removal within the meaning of 28 U.S.C. § 1446(b).
*706
Dudley,
at 1107-08 (quoting
Kircher IV,
The basic point of
Dudley
is simple and, in the Court’s view, correct, namely, that an “order” for purposes of 28 U.S.C. § 1446(b) must contain “a command or direction concerning the existence of federal subject matter jurisdiction.”
Dudley,
at 1107. In other words, to make a case removable an order must actually have some effect on the existence of federal subject matter jurisdiction in the case by, for example, allowing an amendment of a complaint to dismiss a party that defeats jurisdiction, to seek damages in excess of a jurisdictional minimum amount, or to join federal claims.
See id.
at 1108 (collecting cases). Such a rule is consistent both with the general principle that, because removal is purely statutory, it is narrowly construed,
see Shamrock Oil & Gas Corp. v. Sheets,
As
Dudley
recognized, a very important aspect of
Kircher III
was its holding that, contrary to the view of the Seventh Circuit Court of Appeals in
Kircher I,
a determination about preclusion of state-law claims under SLUSA is not a matter of exclusive federal jurisdiction and instead may be decided in either federal or state court.
See Dudley,
at 1111-13. The
Kircher III
decision acknowledged that, under SLU-SA, a defense of federal preemption of state law “coincide[s] entirely” with the basis for federal subject matter jurisdiction under the statute.
Dudley,
at 1111 (quoting
Kircher III,
The Court agrees with
Dudley
that
Kircher III
strongly suggests that the preclusion determination in this instance must be made in state court. As in
Dudley,
the Court does not foreclose the possibility that a defendant may successfully effect a second removal under SLUSA short of a determination about preclusion under the statute in state court.
See Dudley,
at 1112-13 (“[T]he Court does
not
hold that a case can never be removed for a second time under SLUSA absent a determination by a state court about preemption under the statute. Instead, the Court merely holds that, in light of the particular facts and legal issues presented by this case, the judicial decisions relied upon by Defendants as the basis for a second removal of the case do not constitute orders or other paper authorizing such a removal.”). Nonetheless, given the structure of the statute, it is very difficult to imagine what event other than a determination that class-action claims under state law in connection with purchases or sales of covered securities are precluded by SLUSA could authorize such a removal.
8
The Court is satisfied that none of the orders relied upon by Defendants as a basis for successive removal of Plaintiffs’ claims discloses the existence of federal subject matter ju
*708
risdiction so as to permit successive removal under 28 U.S.C. § 1446(b). In the preceding section of this Order, of course, the Court determined that the claims in this case are precluded by SLUSA. However, as
Dudley
observed, federal subject matter jurisdiction is not identical to federal removal jurisdiction: in addition to establishing subject matter jurisdiction, Defendants must also be able to point to some event that has triggered a right to remove these claims a second and third time.
See Dudley,
at 1111 (quoting
Baris v. Sulpicio Lines, Inc.,
Because Defendants have failed to show the Court an order authorizing successive removal in this instance, these consolidated matters must return to state court for ultimate resolution of the issue of SLUSA preclusion. The Court’s determination that Plaintiffs’ claims are precluded by SLUSA, though not reviewable and thus not absolutely binding on the state court,
see Standefer v. United States,
The law of the case doctrine is a rule of prudence, rather than an inexorable command.
See Bagola v. Kindt,
Conclusion
Plaintiffs’ motion for remand to state court based on lack of subject matter jurisdiction (Doc. 19) is DENIED. Plaintiffs’ motions for remand to state court based on procedural defects in removal (Docs. 9, 13) are GRANTED. Pursuant to 28 U.S.C. § 1447(c), these consolidated cases are REMANDED to the Circuit Court of the Third Judicial Circuit, Madison County, Illinois, by reason of a procedural defect in removal. Defendants’ motion to dismiss (Doc. 7) and motion for a hearing on the pending motions in the consolidated cases (Doc. 25) are DENIED as moot. 9
IT IS SO ORDERED.
Notes
. Oddly, the operative complaint contains no substantive allegations with respect to Grench's claims, nor is it entirely clear from the complaint why claims against Janus Investment Fund and Janus Capital Management, LLC, have been joined with claims against Scudder International Fund, Inc., and Deutsche Investment Management Americas, Inc.
. For the sake of simplicity, henceforth the Court, in citing SLUSA, will cite to the statutory amendments of the 1933 Act, which, as noted, are identical to the amendments made by SLUSA to the 1934 Act.
. Although the Court concludes that scienter is a not a requirement for preclusion under 15 U.S.C. § 77p(b)(l), in truth some of the allegations of Plaintiffs’ complaint concerning Defendants’ gross negligence with respect to protecting fund investors from market-timing practices strongly suggest recklessness of the kind rising to the level of scienter.
See SEC v. Jakubowski,
. The Court recognizes the general rule that whether a claim is direct or derivative is tested using the law under which a business entity is organized.
See, e.g., Fogel v. Zell,
. The Court also rejects Plaintiffs’ argument that the removal in this instance is procedurally defective because fewer than all Defendants joined in removal. As a rule, of course, all defendants in a case who are properly joined and served when the case is removed must affirmatively consent to removal.
See, e.g., Northern Ill. Gas Co. v. Airco Indus. Gases, Div. of Airco, Inc.,
. The Dudley decision noted that, because Kircher IV and the order executing the mandate in Kircher IV were generated in the case sought to be removed, they necessarily were “orders” and not "other paper” for purposes of 28 U.S.C. § 1446(b). The decision rea *705 soned that, because the statute refers to both "order[s]” and "other paper,” and because it is presumed that different words in a statute mean different things, a document that is an order in a case sought to be removed ipso facto cannot be other paper under the statute. See Dudley, at 1107 n. 4. The Court concurs in this reasoning.
. As a practical matter, of course, the broad bore of SLUSA preclusion revealed by Kircher II and Habit, discussed at length in the preceding section of this Order, means that it is exceedingly difficult for plaintiffs to plead around the strictures of the statute in order to evade federal court. Thus, it seems unlikely that, apart from very unusual circumstances like the ones presented by these consolidated cases and by Dudley, a defendant seeking to remove under SLUSA would need more than a single shot.
. In this connection it is worth noting that "SLUSA does not actually pre-empt any state cause of action. It simply denies plaintiffs the right to use the class action device to vindicate certain claims. The Act does not deny any individual plaintiff, or indeed any group of fewer than 50 plaintiffs, the right to enforce any state-law cause of action that may exist.”
Dabit,
. The Court notes that, although the instant matter appears on the Court's docket as two consolidated cases, as discussed in the introductory portion of this Order the claims before the Court actually involve only a single case, Potter v. Janus Investment Fund, which is docketed in the Madison County circuit court as Case No. 03-L-1254. Thus, upon remand, it is unnecessary for the clerk of the state court to docket the consolidated matters remanded herein as separate cases; rather, further proceedings in state court should be in Case No. 03-L-1254.